Between the Colorado wild fires, Tropical Storm Debby and the record heat wave, Americans have already been faced with Mother Nature's fury quite a bit this year. A fire or a flood may not have destroyed your home in 2012, but nobody knows what's coming in the future. Because of that, it's important to plan for how a natural disaster may affect your finances. Here are a few ways to prepare for an event you hope will never happen.
SEE: The Financial Effects Of A Natural Disaster
The Obvious Moves: Insurance
Sometimes the most obvious actions are the ones we don't take. Not only can the actual disaster cause damage, but the aftermath can be just as bad. What if your employer was affected and closes its doors temporarily or even permanently? What if you or your family is injured, or you need money now? What does your homeowners or renters insurance cover? Does your auto insurance include a rental car should your car be damaged? Do you have disability insurance in case you're injured and unable to work? Do you have an emergency fund to make your financial ends meet until life returns to normal? Preparations like this seem like unnecessary expenses until they're needed. Talk about these questions with your spouse, employer, insurance agent and financial advisor.
If you live in an area that's susceptible to flooding, it's likely that the bank administering your mortgage will require you to have flood insurance, but even if it doesn't require it, floods as a result of a natural disaster like a hurricane or torrential rain are likely not covered by your homeowners policy. Even floods caused by other events may be a tough sell. Flood insurance only comes from the Federal government.
SEE: Preparing Your Finances From Natural Disasters
Know What You Own
If your property is damaged, the more proof of ownership you have, the better. If you have a smart phone that records video, walk around your home and make a video of every valuable item you own. Include some narration about the brand, when you purchased it and the purchase price. Also, save receipts for high-ticket items and remember to have insurance for items like jewelry and other valuables that your homeowners policy may not cover.
Ditch the File Cabinet
It's true that some documents have to be saved as a hard copy, but that isn't true for most documents. As the world becomes more digital, there will soon be no need for paper copies. If you haven't yet taken the digital plunge, it's time to gather up all of your key documents and have them scanned. There are likely numerous places in your community that can help with this or you can buy a scanner of your own for as little as $50.
Once you have your documents digitized, save them to a DVD or flash drive and give them to a family member that lives outside of your region. You can even password-protect the documents so nobody else can see them. Another option is to save them in the cloud.
SEE: The Economics Of Natural Disasters
Time is an insurance company's best friend. When disaster strikes, don't waste any time contacting your insurance company. You can mentally recover later, but one of your first recovery moves should be to contact your insurance company or agent. Larger insurance companies may have disaster teams already on site to help you with your short-term needs.
The Bottom Line
Hopefully, a natural disaster will never strike you or your family, but as we've seen in recent history, no American is immune to the effects of Mother Nature. Because of that, preparations have to be made. Once you've made the preparations, put all of the documents - hopefully in digital form - in an easy to find place in case they're needed.